Fiduciary Fees and Violations of the Probate Code

March 12, 2011 | Erin Herbold

The decedent in this case died in 2009 and was survived by three adult children. She was preceded in death by her husband. Before her death, she served as the executor of her husband’s estate and was unhappy with the lack of help given her by the co-executor, a local bank. She expressed an interest in changing the executor designation in her own will before her death, but died before making any change.  Upon her death, but before the estate was opened, the bank made several payments from an “estate account” before being formally appointed as co-executor.  

Some weeks later, the estate was opened and the court appointed the bank and the decedent’s daughter as co-executors. The co-executors hired an attorney to administer the estate. In the following months, the co-executors disagreed on several issues involving the administration of the decedent’s estate, including the payment of debts, the distribution of the decedent’s personal property and other issues. Thus, the daughter filed an application asking the trial court to remove the bank as co-executor and to remove the attorney they had hired. She claimed that the relationship between the fiduciaries had “broken down to the point of no return.” 

The trial court determined that the bank had “failed to properly manage the estate” under the requirements of Iowa Code §633.35. The bank was removed as executor and the attorney withdrew. Subsequently, the bank applied for payment of nearly $8,000 in executor fees and the attorney applied for nearly $7000 in attorney fees. The daughter resisted the fee applications, stating that the services of the bank and the attorney did not benefit the beneficiaries of the estate. In the end, the trial court did awarded the bank nearly $6000 in fees and awarded the attorney the full amount for his services. 

The daughter appealed on the issue of fiduciary fees. She claimed that the trial court should have “punished” the fiduciaries for violating their duties under Iowa Law.  Iowa Code §633.162 provides that the court shall take into account any violations of the probate code when assessing fees.  As to the attorney, the court found that the executor’s claims were not properly preserved for appeal.  So, the attorney’s fees award remained unchanged. As for the bank, the threshold question was whether the probate court was essentially “rewarding” the bank for mishandling the decedent’s estate. The court found that the trial court properly compensated the bank for the work they completed and reduced the amount of the applied-for fee by the amount relating to the areas that the bank mishandled. Thus, the bank was awarded only for work that contributed to the “neutral administration of the estate.”  In re Estate of Potter, No. 1-088/10-0952, 2011 Iowa App. LEXIS 192 (Iowa Ct. App. Mar. 7, 2011).